Fine Can Be Cheaper Than Premiums

Millions of Americans have gained health coverage under the Affordable Care Act (ACA). The individual mandate means most people are required to purchase health insurance. There’s a bit of incentive, too. Not having insurance can subject you to a tax penalty.

But, the law leaves plenty of room to fall through the cracks. For some, it’s not a matter of choice. They can’t afford coverage but don’t qualify for a subsidy. This is particularly true in states that did not expand Medicaid under the ACA.

Then there’s another group: those who make the conscious decision to pay the penalty rather than pay for health insurance. For some of them, it’s a matter of principle, a rebellion against the mandate. Others compare the cost of insurance to the penalty and opt for the least expensive.

Paying Your Own Medical Bills

One advantage of health insurance is that insurers negotiate lower rates for services. Often, people without health insurance are billed at significantly higher rates. Bill and Lisa, however, found that many Florida providers offer reasonable self-pay rates.

“An office visit to the walk-in clinic was a $60 copay when we had insurance. The self-pay price is $109,” said Lisa. “That price is not breaking the budget.”

The couple sets aside money each month for medical expenses. They also retained their vision and dental coverage.

So far, they haven’t been turned away from any providers for lack of coverage.

It’s not unusual for people without insurance or means to skip treatment or rack up huge medical bills. Bill and Lisa’s family has been lucky. They haven’t had any major health concerns and they’re grateful for that.

Not that they don’t worry. The decision to remain uninsured didn’t come easily, and it takes a toll. “It’s heavy on my shoulders every day,” said Lisa.

Open enrollment for 2016 starts Nov. 1. So, will this family shop the exchange again this fall?

“I have no desire to shop the exchange,” said Lisa. “I already have and think it’s a rip off, to be honest. No thank you.”

There’s a Penalty for Being Uninsured, but Will You Have to Pay It?

Under the ACA, there’s a financial penalty for not having health insurance. That doesn’t mean everyone has to pay it.

Certain hardships exempt you from the penalty. Among them are:

eviction, foreclosure, homelessness

bankruptcy, substantial medical debt

your utilities have been or are about to be shut off

domestic violence

fire, flood, or other disaster

you have unexpected expenses for an ill, disabled, or aging family member

your income is too low to require a tax return

the lowest-priced coverage available, through a Marketplace or job-based plan, would cost more than 8.05 percent of your household income

you would have qualified for Medicaid, but your state did not expand it

If no hardship exemption applies, you’re on the hook. The fee for not having coverage in 2015 is the higher of these:

2 percent of yearly household income. (Only the amount of income above the tax-filing threshold, about $10,150 for an individual.) The maximum penalty is the national average premium for a Bronze plan.

$325 per person for the year ($162.50 per child under 18). The maximum penalty per family using this method is $975.

That’s more than the 2014 penalty and it will increase again next year. The 2016 penalty will be the higher of these:

2.5 percent of yearly household income

$695 per person ($347.50 per child under 18)

In future years, the fee will be adjusted for inflation. Premiums tend to rise every year, too, although they have increased at a slower rate under the first two years of the ACA.

For those who straddle the budgetary line, it’s a hard choice. Lisa doesn’t believe her family will be eligible for a hardship exemption. They’re fully prepared to pay the penalty.

What Happens When the Uninsured Can’t Keep up with Medical Bills?

Bill and Lisa feel that as long as they pay their bills, it shouldn’t be a problem for anyone else.

But what happens when the uninsured get sick and can’t pay their medical bills?

Jeff Smedsrud, CEO of HealthCare.com, said when that happens, costs shift to those who do have insurance.

“For those eligible for a significant premium tax subsidy, in nearly every circumstance it is better for a consumer to buy health insurance than it is to pay the penalty,” Smedsrud said. “There are some who are between 300 and 400 percent of the poverty threshold who might make a calculation that — temporarily — they are better off paying the penalty. But that is not a sustainable, or common sense long-term strategy for most people.”

Smedsrud believes cooperation between the private sector and government exchanges could improve the situation.

“Better education and better technology will go a long way in reducing the number of Americans who are uninsured by choice,” he said.

Bill and Lisa are aware that it’s a controversial decision, but they stand by it.